Fed Should Hold Off Rate Hike Amid Energy Price Surge

The Federal Reserve is expected to raise interest rates this week, but economist Orphe Divounguy argues that the central bank should hold off. Consumer prices rose 0.4% in August and 3.4% from a year ago, mainly due to energy price increases.

The acceleration of consumer prices can be attributed largely to rising gasoline and diesel costs. Gasoline prices jumped 3.9% in one month, while wholesale diesel prices surged 24.1%. Oil prices have climbed above $100 a barrel as conflict in the Middle East disrupted supply.

Divounguy notes that this is 'a very different problem from an economy where consumers are spending too much and businesses cannot keep up.' He emphasizes that the Fed can make borrowing more expensive, but it cannot produce another barrel of oil.